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free trade

Adam Smith (1723—1790) moral philosopher and political economist

laissez-faire

economics

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mercantilism


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The 17th-century economic belief that aimed to exploit natural resources fully to promote exports and limit imports. Mercantilists believed that the possession of gold or ‘bullion’ was all-important and countries without a source of precious metal must obtain it by commerce; a nation's wealth was seen as chiefly dependent on its balance of trade. Trading was controlled by government-backed companies, tariffs were imposed, and trade wars, such as the Anglo-Dutch Wars were fought. Later supporters of free trade (laissez-faire) opposed the mercantilist theory that the volume of trade is fixed and that to increase one's share one must lessen that of others. In a celebrated essay of 1752, David Hume contradicted the mercantilist view, arguing that a country's bullion reserves were essentially determined by the size of its economy and its consequential need for money as a circulating medium, and would not be permanently influenced either way by government interference with trade.

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